Retain Rajan as RBI Governor, Bhagwati advises Modi

Describing the BJP's election victory as an "astonishing triumph of Narendra Modi", noted economist Jagdish Bhagwati on Monday advised him to retain Raghuram Rajan as RBI Governor and to hold monthly press conferences to articulate the government's agenda.

"The astonishing triumph of Narendra Modi in the greatest election ever held puts India back on the map.

"Unlike the UPA leaders, the new PM, who is not tongue-tied, should hold monthly press conferences where he can bring his agenda and actions before the public and carry them with him. He was wonderfully articulate during his campaign; he can do no less now that he is the Prime Minister," he said.

Replying to PTI’s questions, the economist put his weight behind Reserve Bank Governor Rajan, advocating that he should remain at the helm.

"I also believe that he (Modi) ought to keep Raghuram Rajan. He is a major economist who commands international respect as well," said Bhagwati, Professor at Columbia University.

There has been speculation that the Modi-led government could change the RBI Governor. Rajan had recently asserted the independence of the central bank.

"I determine the monetary policy. I say what it is. The government can fire me, but the government doesn't set the monetary policy. So, in that sense, am I independent. Well, I am happy to talk to the government. I am happy to listen to the government but ultimately the interest rate that is set is set by me," he said at St. Gallen Symposium in Switzerland.

Bhagwati said the new prime minister will have many brilliant economists to draw on and many abroad want to go back to help.

"Arvind Panagariya is an obvious choice for the top advisory position. He has written forcefully and with great insight on most of the issues before the country and has stood his ground successfully, with facts rather than assertions, against bigger names," he added.

Modi, he suggested, can draw on economists such as Bibek Debroy, Shankar Acharya, T N Srinivasan and Easwar Prasad.

Referring to sceptics who say they have "anxiety" about Modi's secularism, Bhagwati said: Perhaps the only cure for it is to take Valium or Xanax, since nothing else will reconcile them with the electoral outcome and the fact that nothing culpable has ever been found against Modi for the 2002 riots."

The Modi-led BJP won 282 seats in the just-concluded general elections in the house of 543. The party and its allies have cornered 336 Lok Sabha seats.